Kat's referring to the unthinking deference of German soldiers and civilians alike to the generals. They're all blindly going along with what the generals are doing instead of questioning whether their approach to the war is actually correct.

This is clearly a deep-seated attitude, one that has been present in German society for some time. The German Army enjoyed a special kind of prestige for centuries that no one seriously questioned. For instance, government spending on the armed forces was exempt from meaningful scrutiny by democratically-elected politicians. The result of all this, as Kat ruefully reflects, is that Germany is losing the war. Too much trust has been placed in the generals for too long, and now the whole country is about to suffer the consequences.

This quote comes from Chapter 3 of the book.  In it, Kat is basically saying that they are losing the war because they are too obedient.  Their army has given some people (the officers, in particular) too much power over the others.  The others do not think at all for themselves.  They just salute and do as they are told.

Because of this, says Remarque, the soldiers are dehumanized.  They lose their individual personalities and are therefore less likely to function well in the war.

I do not really see, though, why loss of individuality is supposed to make them lose the war since the whole war is dehumanizing to both sides (as this book shows).